WHAT TO DO NOW: Growth stocks remain under the gun, and while we’re already relatively defensive in the Model Portfolio, we’re going to do a little more trimming now, selling one-quarter of our remaining shares of both Roku (ROKU) and Twilio (TWLO). That will leave us with 57% in cash.
Friday is shaping up as another dismal day for growth stocks, while the broad market attempts to hold up—as of 11:30 eastern, the Dow is down 123 points but the Nasdaq is off 287 points and our list of growth stocks (own or are watching) is off 7% on average.
Big picture, our Cabot Tides remain on the fence; if you happen to own financial or energy or transportation stocks, there’s no reason to panic (though it’s always good to have a plan).
But as we wrote yesterday, there’s no question that the growth arena is in a correction until proven otherwise, and that argues for a cautious stance where we’re mostly focused on preserving capital for the next uptrend.
With the Model Portfolio already 52% in cash, we’re not eager to sell more at this point. At the same time, the weakness in many growth stocks is “impressive” (in a bad way), and we never prefer to simply hold and hope in those situations.
Thus, today, given the continued mini-crash in growth stocks, we’re going to make two more small moves.
First, we’re going to sell another one-quarter of both Twilio (TWLO) and Roku (ROKU), cutting our position sizes a bit more and respecting the sharp drop of the past week. Truth be told, we do think these (and other) names will eventually bounce pretty well, but we think respecting the action and trimming a bit more makes sense.
That will leave us with around 57% cash in the Model Portfolio. We’ll be on the horn next week with any further changes and advice. Don’t hesitate to email me mike@cabotwealth.com with any questions!